Commercial Aspects of SHG Banking in India

Nabard’s programme Linking Banks and Self-Help Groups aims at providing sustainable access to financial services to the rural poor, with a focus on those who had been considered unbankable. By using the existing rural financial infrastructure of 150,000 banking and cooperative retail outlets and linking them to savings and credit groups with joint liability, there are economies of scale and scope, resulting in substantially lower transaction costs. National implementation started in 1996, after four years of pilot-testing. Due to massive support from governmental and non-governmental agencies and the banking sector, the programme grew rapidly and, by March 2002, encompassed 461,000 self-help groups (now, in November, more than 500,000) with 8m members, covering 40m household members. Average loan sizes are Rs 22,240 ($463) per SHG and 1,300 ($27) per member.